Little To Fear for Businesses So Far
The Patient Protection and Affordable Care Act is here to stay, most experts agree. The politics of the issue, while unsettled are fading, the Supreme Court ruled the law is legal, and soon too many Americans will have coverage under their employers; from the exchanges, or Medicaid that dismantling it is not feasible.
The Only Things We Have to Fear Is...
Businesses, generally want predictability from government, not surprises. So what can you expect knowing what we know now. Generally, big businesses will be doing the same, just differently. 99% of businesses with over 200 employees already provide health insurance for their workers. The remaining one percent will have either to begin insuring their workers by 2015 or face a $2,000 per employee penalty. Some cynics suggest that employers who already provide insurance may opt for the penalty as it is cheaper than insurance. That is less likely if they wish to attract and keep the best employees. However, there have been some notable retail firms that have announced plans to cutback healthcare insurance benefits for part-time workers. Read: Trader Joe's Will Cut Health Benefits for Part-time Employees.
Little Will Change for 50 - 200 Employee Firms
The next group of businesses, with between 50 and 200 employees, seemingly face larger impacts from the Patient Protection and Affordable Care Act. However, a recent Kaiser Foundation study found that 92 percent of companies with 51 to 100, and 97 percent of employers with 101 or more workers, already provide health insurance. So there should be little effect here.
That leaves the group with less than 50 employees, representing the highest numbers of businesses, and they are exempt from the employer mandate. In reality, only a 3 - 7% of firms with between 50 - 200 employees will have to make significant changes to comply with the employer mandate.
A Lot of Change for Small Firms, But Not a Disaster
There are employers who potentially can be winners under the Affordable Care Act. Employers with less than 25 employees can get tax credits that equal 35 percent of the employer’s premium. In addition, they can shop at the state or federal Obamacare business exchanges for insurance, which should provide competitive pricing. Therefore, these small employers, of whom less than 50 percent offer health insurance now, have the choice of offering it and getting real tax benefits or not offering them and being exempt from penalties. For small employers, there is a final outcome that has been getting a lot of positive and negative attention. There is likely to be a substitution effect where employees obtain health insurance from exchanges privately . One logical resolution for small employers, whether or not is implemented politically, would be that they cloud use new tax credits to subsidize, with direct payments to employees their private purchase of health insurance from exchanges. Perhaps, with such a subsidy this could another way small employers could comply with the employer mandate. That this option makes sense does not mean it will ever happen.
What the Future Holds for Obamacare and Business
Only three things are certain under the Affordable Care Act:
- A larger than expected increase in the number of Americans with health insurance has already occurred and will continue to grow.
- The new law has significantly increased the federal government’s interest, investment, and influence on health insurance and health care.
- Politically, there will be tinkering with the ACA, but until there is real experience of how the bill influences health care outcomes, and costs, expect no real changes.
Perhaps the most significant change in the law already, is the federal government's delay in the implementation of the employer mandate. According to the New York Times, the general delay in the requirement for all employers with over 50 employees is until January 1, 2015, with two additional delays to help smaller employers: Employers with between 50 and 99 employees don't have to comply until 2016, and
"the requirement would be put into effect gradually for employers with 100 or more employees. Employers in this category will need to offer coverage to 70 percent of full-time employees in 2015 and 95 percent in 2016 and later years, or they will be subject to tax penalties."
There are minimum financial considerations concerning premium coverage. The ACA says that employees will have affordable health care coverage. There are clarifications to the word "affordable" though:
- The employer pays for at least 60 percent of total covered health care costs.
- No employee pays more than 9.5 percent of family income to buy the employer-provided coverage.
There will be penalties applied to employers of more than 50 full-time employees who do not meet these requirements.
However, there has been a lot of talk in the news media about another bad outcome: that large employers will take the penalty and not pay the premiums. This is not a sure bet.
- As mentioned above, large employers usually provide health benefits. They use health benefits to attract and keep good employees so they stay competitive.
- Most companies categorized as large employers already provide health benefits.
- Health benefit cost is tax-deductible; penalties for failure to pay are not.
It is likely that businesses will strike a fair balance between tax efficiency (writing off health insurance premiums or taking tax credits) and retaining employees. In doing so they are likely to ensure, however it's done, that their employees have health insurance coverage.
Unless premiums explode, outcomes for health care worsen, or health care costs again rise at multiples of the core inflation rate, it will be business as usual for most employers under the future of Obamacare. Indeed, many small business owners, (less than 50 employees) may have health insurance for the first time since they opened their doors.